South Korea leads the way on 3G (even though it's 2.5G)

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South Korea may be the great world economy recovery play, but it's only just out of the sick bay. And, as the case of the sorry Hynix illustrates, admittedly in extremis, the world's eleventh biggest economy has to overcome this basic problem - not enough profit and too much debt.

But in some matters South Korea is world-class: Taekwondo, riots, kimchee, multiplayer gamers, broadband and now - 3G.

According to Strand Consulting, a UK research firm-cum-fan of the Korean comms infrastructure, SK has overtaken Japan to become by far the most developed market for mobile services in the world. This is a real-world lesson in 3G to the rest of the world, with multiple operators who have refrained from dishing out handset subsidies, Strand argues.

The SK infrastructure is 2.5G, a CDMA 2000 1X network, but its 144 Kbs of transmission speed is sufficient to handle "almost all 3G mobile services" i.e. not streaming video, Strand says.

But take-up in South Korea is huge, with 40 per cent of mobile phone users owning a 1X terminal. SKT, the biggest mobile network has 8.8 million customers for its CDMA 2000 1X service - 75 per cent of its subscriber base.

It's a different story in Japan, where only 4 out of every 1000 mobile users in Japan own a heavily subsidised NTT DoCoMo FOMA 3G handsets (capable of transmitting at 384 Kbs), according to Strand. And the high penetration rate in SK has been achieved without subsidising the handsets.

SKT, South Korea's largest mobile operator, has in a relatively short time attracted more than 8,8 million subscribers to its CDMA 2000 1X based services. Already these subscribers represent 75% of SKT's total customer base.

So what is the secret of the 2.5G success in SK? We suspect that cultural attitudes to new technology plays a great role, but Strand has nothing to say on this matter.

Instead it points to King Content. The SK mobile operators have cut revenue-sharing deals which are attractive enough for content provider to build services. The services in turn are attractive enough for users to "subscribe to these services and to upgrade their 2G terminals. This positive chain reaction has resulted in a considerable increase in the number of both content and service providers," says Strand.

"South Korean operators have done what operators in Japan and elsewhere have refused to do. They have accepted their role and responsibility as drivers of the market for mobile services. They have understood that this chain reaction is key to the successful development of the market for 2.5G and 3G mobile services."

Sounds simple, doesn't it? But equitable revenue- sharing deals does not come naturally to telecom operators. Certainly in Europe. The Register, for instance, was once approached to supply news for an IT channel set up by a broadband provider. The cost - to us! - would have been £5,000 a month for this privilege.

The mobile network operators too have had difficulties in intellectually offering reasonable revenue splits with content providers. This is, even more so than competing standards, is the major reason why content providers are so reluctant to spend too much effort on building mcommerce propositions. It is far, far easier to stick up a PayPal button, customer complaints and all. ®